ECO 404, GDB, No 1 Due Date 12-11-14 to 14-11-14.

SUBWAY is a prominent American fast food restaurant franchise that mainly sells submarine sandwiches and salads. It was established in 1965 in Bridgeport (United States). It has 42,859 restaurants in 108 countries and territories as of October 23, 2014. It has stores not only in Pakistan but also in United States. Its international headquarters is in Milford, Connecticut. SUBWAY restaurants have massive business at lunchtime, but it was observed that the meals which were offered on promotional price at the time of breakfast and dinner made substantial profit contribution.

Requirement:

Does the success of SUBWAY restaurants in this regard reflect an effective application of the marginal profit concept or the incremental profit concept? Explain.

page 6 of handout -->A marginal relation is the change in the dependent variable caused by a one-unit change in anindependent variable. For example, marginal revenue is the change in total revenue associatedwith a one-unit change in output; marginal cost is the change in total cost following a one-unitchange in output; and marginal profit is the change in total profit due to a one-unit change inoutput.

I think answer is incremental not marginal.Read this from http://www.smallbusiness.chron.comIncremental earnings provide an indication of a company's growth rate based on its investment decisions. Incremental earnings are best defined as the amount that a firm's earnings rise as a result of those investments, such as new products to sell.ExampleA technology company that decides to conduct incremental analysis to determine the potential revenue from the completion of a new product will first estimate the projected revenue from sales of the product. If the projected sales were $500,000, the operating expenses and depreciation would be subtracted from this total. Costs can include research and development costs, depreciation, new equipment and annual overhead expenses. If these costs totaled $100,000, then the operating earnings before taxes would be $400,000. With estimated taxes at 10 percent, another $40,000 would have to be subtracted from this for a total of $360,000 in operating earnings after taxes.

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